Industry Leaders: Rent Regulations: A New York phenomena - A simple understanding by Stern

New York City is the only large city in the world that has laws designed specifically to only protect tenants. There are, currently, well in excess of 1 million rent stabilized tenants (up to 3 million). In addition, under 28,000 tenants enjoy the protection of Rent Control Status. Rent Control Laws were first passed by the Federal Government 1920 to protect tenants. They protect tenants who have resided in their apartments since 1971. In addition to the tenants, certain delineated persons are allowed to succeed to the apartment, as well. In effect to inherit, without paying inheritance taxes. Rent Stabilization Laws began in 1943, at one point expired, and then were re-enacted in 1974. The laws mostly apply to buildings with 6 or more apartments. The original intent of the law was to protect WW II veterans. New York City regulates, through the Rent Guidelines Board (RGB), a board admittedly controlled by the New York City mayor, the amount of increases that owners of these apartments may get each year. The current increases are 0% for one year and 2% for two year renewals. Under very specific conditions, an owner may deregulate an apartment. A recent court decision subsequently codified by NYS legislators (upon the insistence of NYS’s governor), may result in some apartments previously deemed deregulated from rent stabilization to become regulated again. See also the Stuyvesant Town decision by New York Courts where the owners of a large housing complex had its units put back into Rent Stabilized status. Over the years, the regulations have been constantly extended by politicians, even though the initial purpose of the laws was temporary in nature. The laws surrounding this are the source of major, regular political battles, currently culminating every six years in political turmoil and the dissemination of misinformation by those seeking greater strengthening of the laws. The political party in power in NY determines whether the laws are changed and usually, to what extent, previous changes not so onerous to owners are rescinded or modified to protect tenants. Also, in New York, what the legislature cannot accomplish in protecting tenants, you will often find the Judicial System affording additional protection to tenants. When you compare the voting power of millions of tenants - and their families - to the 27,000 owners - and their families -  the reasons are clear. Owners of regulated apartments are required to register their apartments every year with NYS Division of Housing & Community Renewal (DHCR). In addition, any building with more than 3 apartments or where an owner does not reside on the premises must register with New York City Housing Preservation & Development (HPD). Failure to so register will have negative impacts on owners. Non-regulated buildings and apartments are allowed to raise rents as the market dictates. Regulated apartments have increases dictated effectively by the mayor of New York City. The increases are almost never equal to the increases in owners expenses (e.g. real estate taxes or water & sewer charges) imposed by the same mayor. To add to the burdens of New York City owners, New York City always increases penalties imposed against owners and enforcement, knowing the owner cannot just pick up their building and leave. Examples include Summonses to owners when tenants fail to separate their recyclables from garbage or when enforcement agents sit in front of buildings waiting for litter to alight onto an owner’s property or the massive fines levied on owners when a tenant violates New York short term rental law, through websites like Airbnb, by renting out their apartment for less than30 days. The law provides no penalties for tenants and places the responsibility on owners for actions of their tenant. Such is the mindset of New York Politicians. Tenants are to be protected at all costs, even from their own violations of the law. Accordingly, if you are going to venture into the New York City regulated market it is absolutely essential that your team include specialists in rent regulations and DHCR registrations. Leases and filings must be reviewed with a fine tooth comb. Howard Stern, Esq., is the owner and an attorney at Law Offices of Howard Stern, White Plains, N.Y.